How Much Does a Bigger Down Payment Really Save You?

How Much Does a Bigger Down Payment Really Save You? 

 One of the first decisions most homebuyers face is how much to put down. You’ll often hear that “bigger is better,” and while there’s truth to that, it isn’t always that simple. The right down payment really depends on your overall situation, your goals, and how much financial flexibility you want to keep once the deal closes. Let’s use an example. On a $500,000 home, the minimum down payment is 5%, or $25,000. With default insurance added, the mortgage ends up just under $494,000. At a 5% interest rate, that’s about $2,873 per month. If you can put down 10% instead of 5%, your mortgage amount falls to about $463,950, with a monthly payment closer to $2,698. At 15% down, it drops again to around $2,543. And if you put 20% down and avoid default insurance altogether, your mortgage is $400,000 with a payment of roughly $2,329. That’s a swing of over $500 per month between the 5% and 20% scenarios. Clearly, larger down payments save money — but does that mean everyone should stretch to put down 20%? Not necessarily. Why Bigger Isn’t Always Better If putting 20% down means draining your savings completely, you may actually be worse off in the long run. Life has a way of throwing curveballs — job loss, reduced hours, a vehicle breakdown, or unexpected home repairs. If you’ve put every last dollar into your down payment and have no savings left, even a small setback can put you under financial stress. In those cases, it might be smarter to put less down and pay a bit more in default insurance, while keeping money aside as a cushion. That safety net can be worth far more than the $500 or so you’d save on your monthly mortgage payment. Another situation is if you already have a large amount invested and you’re earning strong returns. If your investments are consistently performing, you might be better off leaving more money invested and putting down less on the home. The extra interest you earn could outweigh the cost of carrying a slightly larger mortgage. When More Down Makes Sense On the flip side, there are times when putting more down is the right move. Let’s say you’ve built up savings, you’re comfortable with the amount you’ll have left over, and you want to reduce your monthly payments as much as possible. For example, a young family planning for daycare expenses might want the lower payments that come with 20% down. Lower payments mean more breathing room in the budget, and avoiding default insurance saves thousands right off the top. Another scenario is for someone nearing retirement who doesn’t want the burden of high monthly payments. Putting a larger down payment reduces the balance faster and can make it easier to manage expenses on a fixed income. No Right or Wrong Answer At the end of the day, there isn’t a “right” or “wrong” down payment amount. The 5%, 10%, 15%, and 20% examples show the math, but the best choice depends on your personal situation. Some people benefit from minimizing their monthly payments, while others prefer the security of keeping extra money in the bank or invested. The important thing is balance: put down what makes sense for your goals, while still leaving yourself room to handle the unexpected. Final Thoughts Bigger down payments save money — that part is straightforward. But saving money isn’t the only factor in play. Sometimes the right move is to pay a bit more in insurance or interest to keep your financial safety net intact. Other times, especially when stability is the priority, putting more down is worth it. Curious which option is best for you? Start your application today and get a personalized breakdown of how different down payments would look in your situation.